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China conflicts prompt chip manufacturing battles in Europe

Germany blocks sale of fab to Chinese firm, Taiwan's investments challenged in Lithuania

China is at the center of two conflicts in Europe as the continent strives to shore up domestic chip manufacturing capabilities.

German chip manufacturer Elmos Semiconductor says it was informed by the government that the planned $85 million sale of its wafer fab to Chinese-owned Silex Microsystems "will most likely be prohibited." Silex Microsystems is a Dutch subsidiary of China's Sai Microelectronics.

Elmos, which focuses on automotive chips, said the move was a surprise, given that Germany's Ministry of Economics and Climate Protection had previously indicated the sale would "most likely be approved."

Germany has been making moves to protect Western semiconductor technology and supply chains from Chinese interests, according to The Financial Times. Robert Habeck, Germany's economic minister, reportedly said while the country should build relations with China on a broader level, Germany needs to exercise "particular sensitivity" when it comes to transactions in "critical sectors" like the semiconductor industry.

"That means that we should assume that Chinese investments (in such sectors) have higher hurdles to clear, and that goes for Elmos," he said, according to the newspaper.

Germany's decision, which is expected to be made official at a Wednesday cabinet meeting, comes on the heels of the return of the country's chancellor, Olaf Scholz, after his first visit to Beijing. Before leaving, Scholz said Germany needs to lower its reliance on China in areas that are "risky" and "one-sided" by scrutinizing investments and broadening the country's supply chain.

Scholz has apparently not been consistent with that view, however, given his unpopular decision to approve the sale of a stake in the port of Hamburg to Chinese shipping company Cosco.

China warns Taiwan over high-tech investments in Lithuania

The news of the blocked wafer fab sale in Germany emerged as China's government issued a warning to Taiwan over its plan to invest in chip manufacturing and other high-tech industries in Lithuania.

China is poised to oppose efforts by the island nation, which China claims as its own, to collude with other countries and claim independence, according to Reuters.

The warning was made after Taiwan announced an investment of $3.5 million in Lilit, a Lithuanian startup focused on ultrafast laser technology, the news agency said. The investment is the first of three planned investments totaling nearly $10 million in the European country's high-tech industries.

In addition, Taiwan's Industrial Technology and Research Institute plans to work with electronics manufacturer Teltonika to develop chip manufacturing capabilities in Lithuania, according to DigiTimes, which cited a report from the Chinese-language United Daily News in Taiwan.

Ming-hsin Kung, the minister of Taiwan's National Development Council, reportedly said semiconductors will be the primary focus for Taiwan's collaboration with Lithuania. The Baltic state is also expected to get a boost for electric vehicle and laser development spending from the partnership.

This marks the latest move in growing ties between Lithuania and Taiwan, which has enraged China and prompted it to cut off trade from the European country earlier this year.

The new developments in Germany and Lithuania are the latest signs in escalating tensions between Western governments and China over semiconductor manufacturing capabilities. They don't look likely to ease soon. ®

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